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One state adds a 7 percent sales tax to the price of most

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Director
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One state adds a 7 percent sales tax to the price of most [#permalink]

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14 Sep 2005, 19:35
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One state adds a 7 percent sales tax to the price of most products purchased within its jurisdiction. This tax, therefore, if viewed as tax on income, has the reverse effect of the federal income tax: the lower the income, the higher the annual percentage rate at which the income is taxed.

The conclusion above would be properly drawn if which of the following were assumed as a premise?

(A) The amount of money citizens spend on products subject to the state tax tends to be equal across income levels.
(B) The federal income tax favors citizens with high incomes, whereas the state sales tax favors citizens with low incomes.
(C) Citizens with low annual incomes can afford to pay a relatively higher percentage of their incomes in state sales tax, since their federal income tax is relatively low.
(D) The lower a stateâ€™s sales tax, the more it will tend to redistribute income from the more affluent citizens to the rest of society.
(E) Citizens who fail to earn federally taxable income are also exempt from the state sales tax.

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14 Sep 2005, 21:56
"A"
Since the argumen states that the lower the income, the higher the annual percentage rate at which the income is taxed. This can be possible only when A is true. for example - if everyone buys good worth 50 bugs. The tax on this will be greater percentage to the people with lower income than on higher income.
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15 Sep 2005, 03:13
A fails the negation test.
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15 Sep 2005, 07:32
"A" shud be the correct answer
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15 Sep 2005, 11:39
IMO A
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15 Sep 2005, 11:54
I pick A - A shows that if your tax rate is dependant upon your level of spending. So a person could be in a zero % tax rate if he/she didn't spend any money. Therefore, this argument depends on whether spending levels are constant between high and low income people.
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15 Sep 2005, 12:29
A supports conclusion
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15 Sep 2005, 13:40
One state adds a 7 percent sales tax to the price of most products purchased within its jurisdiction. This tax, therefore, if viewed as tax on income, has the reverse effect of the federal income tax: the lower the income, the higher the annual percentage rate at which the income is taxed.

The conclusion above would be properly drawn if which of the following were assumed as a premise?

(A) The amount of money citizens spend on products subject to the state tax tends to be equal across income levels.
(B) The federal income tax favors citizens with high incomes, whereas the state sales tax favors citizens with low incomes.
(C) Citizens with low annual incomes can afford to pay a relatively higher percentage of their incomes in state sales tax, since their federal income tax is relatively low.
(D) The lower a stateâ€™s sales tax, the more it will tend to redistribute income from the more affluent citizens to the rest of society.
(E) Citizens who fail to earn federally taxable income are also exempt from the state sales tax.

A)not objetable
C)not relevant
D)not relevant
E)not relevant

So IMO A is the correct answer
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15 Sep 2005, 17:16
Tough question. I'm torn between A and C. Can anyone that picked A explain how they ruled out C? Thanks
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15 Sep 2005, 17:19
popew626 wrote:
Tough question. I'm torn between A and C. Can anyone that picked A explain how they ruled out C? Thanks

Eventhough the value of their fedral tax might be low, we dont know how much percentage of their income they are paying..which is out of scope of the question...
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15 Sep 2005, 17:23
popew626 wrote:
Tough question. I'm torn between A and C. Can anyone that picked A explain how they ruled out C? Thanks

"can afford to pay" seems out of place to me. But can't elaborate more than that.
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17 Sep 2005, 10:08
A. Gud Qn.

Rahul, if I may what is the source of this qn?

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17 Sep 2005, 11:56
I will pick A.

What is the OA.
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17 Sep 2005, 12:01
hmm..between A and C, I wud go for A.

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17 Sep 2005, 16:39
OA is A guys!! You guys are real cool eh? I couldnt get the answer so easlily at all!

Hey GA, this is from a collection that i got from a buddy! My guess is its probably from one of the GMAT PLUS collections! Not sure!
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